Policy Point: For better or for worse: How governments respond to crises

As New Zealand nears the end of the Covid-19 public health emergency, all eyes are on the economic recovery. The New Zealand Government has already indicated the post-recovery world will look quite different. It has also given itself great flexibility in designing policies for this crisis. For example, it has temporarily suspended the financial scrutiny forms called Regulatory Impact Statements, relaxed visa rules and is about to relax planning procedures.

Though, understandably, the Government wants to move quickly, it is important not to rush policies. If the experience of past crises is anything to go by, there is a danger that well-intentioned crisis measures can become wasteful exercises and provide a quick employment hit at the expense of long-term fiscal liabilities. New Zealand must avoid such flash-in-the-pan experiences. Instead, it needs a sustainable, long-term strategy for a lasting recovery.

This paper looks at the structural conditions that make for such good recovery policies. It also offers examples of international recovery policies that went wrong and serves as a warning not to choose a quick economic sugar hit over a more wholesome economic diet.